Monthly Archives: June 2014

There wasn’t too much that gave any reason to think that the market would behave much differently today than it did to begin the week.

My hope was that wouldn’t extend itself into my personal actions, because I can’t really recall the last time a week started without a single trade of any kind being made.

With the appearances of another flat start to the trading day it was hard to see where the contrast to yesterday was going to come from.

Any one who has a reason to give for the strong sell-off that materialized and then picked up steam in the early afternoon is just making it up. Nothing changed, although someone will surely point to some obscure signal on the charts and try to make everybody believe that they are idiots.

Ultimately the ending market change for the day isn’t very significant, as it’s what transpired in-between that has much in the way of importance. Yesterday was one of those days where there wasn’t much going on in-between the opening and closing bells.

Today was one of those days when there was lots of intra-day movement. If you’re selling options your favorite scenario is when there’s lots of movement but you don’t really go anywhere, especially if it happens all in the same day and you also happen to be lucky enough to have timed it just right.

When talking about volatility it also is not simply a case of looking at the beginning and at the end. It is really a measure of the variation that takes place in going from Point A to Point B. Yesterday was one of those days when the distance between those two points was nearly a straight line and with very little variance from the path.

Part of the reason that it was difficult making any trades yesterday was the lack of clarity regarding any short term directional move. Directly related to that was the extremely low premiums that were being offered for contracts of any kind. Neither call buyers nor put buyers had any real commitment or strongly held belief in their thesis and they surely weren’t willing to pay and put their money where their silent mouths used to be.

Trying to seek out decent premiums by looking at expanded weekly options, such as for next week’s shortened trading week, didn’t really offer anything worth pursuing, although news like an 8% drop in Dubai overnight could have some trickle down effects, such as necessitating sale of US assets in order to meet Dubai asset margin requirements.

But that’s pretty farfetched for the moment, although it could increase the uncertainty that feeds premiums.

Not that I want to be the guy that offers a reason for today’s sell-off, but that’s at least something to consider. It’s not an obscure technical, but it’s the best I could do.

For the remainder of the week I’m still hopeful that something will occur or at least some opportunities will make themselves known, but it may end up being an unusually slow week from every perspective.

Having money to invest makes it difficult to accept that fact, although as long as the portfolio does well it’s a little easier to have some patience when it comes to deploying that cash, although I and many others do like the flow of income that’s generated from activity and won’t simply generate itself, other than from the occasional dividend payment that finally gets credited to the account.

While no trades were made yesterday I still had my eyes on both Deere and Dow Chemical in order to capture those dividends. Unfortunately, my preference would have been looking at the July 3, 2014 expiration, but neither offered expanded weekly options and the monthly options weren’t offering the kind of reward that warranted the 4 week commitment. In fact, if bullish and shares do climb in value, those low premiums could end up being costly while awaiting expiration or a chance to close the positions early.

More unfortunately the market decided to accelerate its losses after the purchase of Dow Chemical shares, but there’s still tomorrow and many days after.

So with today in the books and it being a rare one sided day to the downside it will likely begin all kinds of speculation as to whether this is finally the correction that we’ve all been waiting for.

I for one really don’t want to hear any potential retreat in prices being referred to as “healthy,” at this point.

Even with lots of cash still looking for redeployment, I’d rather see some lack of health as long as that translated into a growing bottom line. If today was healthy I really don’t want any part of it.

There’s not too much that gives any reason to think that the market will behave much differently today than it did to begin the week.

Hopefully that doesn’t extend itself into my personal actions, because I can’t really recall the last time a week started without a single trade of any kind being made.

With the appearances of another flat start to the trading day it’s hard to see where the contrast to yesterday is going to come from.

Ultimately the ending market change for the day isn’t very significant, as it’s what transpired in-between that has much in the way of importance. Yesterday was one of those days where there wasn’t much going on in-between the opening and closing bells.

When talking about volatility it also is not simply a case of looking at the beginning and at the end. It is really a measure of the variation that takes place in going from Point A to Point B. Yesterday was one of those days when the distance between those two points was nearly a straight line and with very little variance from the path.

Part of the reason that it was difficult making any trades yesterday was the lack of clarity regarding any short term directional move. Directly related to that was the extremely low premiums that were being offered for contracts of any kind. Neither call buyers nor put buyers had any real commitment or strongly held belief in their thesis and they surely weren’t willing to pay and put their money where their silent mouths used to be.

Trying to seek out decent premiums by looking at expanded weekly options, such as for next week’s shortened trading week, didn’t really offer anything worth pursuing, although news like an 8% drop in Dubai overnight could have some trickle down effects, such as necessitating sale of US assets in order to meet Dubai asset margin requirements.

But that’s pretty farfetched for the moment, although it could increase the uncertainty that feeds premiums.

For the remainder of the week I’m still hopeful that something will occur or at least some opportunities will make themselves known, but it may end up being an unusually slow week from every perspective.

Having money to invest makes it difficult to accept that fact, although as long as the portfolio does well it’s a little easier to have some patience when it comes to deploying that cash, although I and many others do like the flow of income that’s generated from activity and won’t simply generate itself, other than from the occasional dividend payment that finally gets credited to the account.

While no trades were made yesterday I still do have my eyes on both Deere and Dow Chemical in order to capture those dividends. Unfortunately, my preference would have been looking at the July 3, 2014 expiration, but neither offered expanded weekly options and the monthly options weren’t offering the kind of reward that warranted the 4 week commitment. In fact, if bullish and shares do climb in value, those low premiums could end up being costly while awaiting expiration or a chance to close the positions early.

Of course, if today ends up like yesterday and no trades are made, I’ll still get some solace from looking at the bottom line, as yesterday was worthwhile compared to the S&P 500, but that sort of thing can’t really be expected to continue in a passively held portfolio unless you’re either very lucky or very well informed.

I can’t count on either so my hope is that some activity will return before I no longer have any excuse to keep putting off the vegetable garden weeding.

When did that last happen? I’ll save you the need to check your archives. It just hasn’t happened. I even had new trades coming out on the Monday after my heart attack when I basically had to hijack a wireless heart monitor to get a signal in a London hospital.

Based on the economic calendar it looked as if this may be a quiet week as the new monthly option cycle begins, but I wasn’t expecting a start like this one. Not only is there little of importance, but maybe because this is the first week of summer, there’s just very little in general. A big part of that is that not a single Federal Reserve Governor is giving a speech this week, so there is less likelihood of having someone in a position to actually impact policy saying something that’s either a slip of the tongue or gets to be mis-interpreted by anyone with a nervous finger or algorithm.

In addition, earnings season is pretty much at its end as the next season will get set to begin in about two weeks. While any given company can do as Intel did a couple of weeks ago and unexpectedly announce improved guidance that can propel markets or severely diminished guidance to shock markets, it’s not too likely that will happen.

Unless there are some real unforeseen surprises the only thing that may upset the market will be continued unraveling in Iraq and a significant rise in oil prices.

While growing US energy production makes us less hostage to oil, the reality is that our prices are still part of a worldwide market and if supply dries up in a world that’s increasingly thirsty for crude oil it will drive up our prices, as well, and slow things down on our end. While it would take a while for that to really show up on our economy the fears would begin immediately and could easily dampen the enthusiasm that Janet Yellen rekindled last week when she made it pretty clear that stocks were the way to go for now.

Not in so many words, but if you live in a world where the choice is between stocks and bonds, she gave little reason to believe that interest rates would be heading higher in 2014. Considering that much of the stock market weakness in 2014 has been related to the 10 year rate approaching 3%, you can draw a conclusion that if rates stay low then the market has reason to keep moving up even as Federal Reserve tapering continues.

This week I’m holding more cash than in about 3 months and put not even the slightest dent into that cash, but more importantly did nothing to generate any income, either.

The combating forces this week are much like they seem to be most every week.

With the market at more new highs and with so many stocks near their personal highs just how much do you believe that the pattern keeps continuing? Where do you find value?

Any effort in second guessing the forward movement of the market has proven wrong and I’ve definitely been on that side of things. Despite being pessimistic about the ability of the market to continue that pattern that ha
sn’t meant hibernating and completely abdicating the need to participate.

With money, but not to burn, in hand, I don’t envision this week being any different in terms of my willingness to let some of it go and try to generate some revenue.

The past few weeks have been relatively slow ones in opening new positions, but I expected this one would be somewhat more active, as I was willing to take cash down to about 25%. As a defensive move I wouldn’t be completely adverse to seeking July contracts instead of weekly ones, but with volatility still so low and the short term prospects seeming positive, it’s hard to justify tying up assets.

In hindsight I may believe differently, but for the moment it makes more sense to live for today.

With that said, but already having a number of positions set to expire this week, there may at least be some reason to look for a little diversification, perhaps toward next week’s shortened trading contracts.

In addition to that bit of defensiveness I wouldn’t mind continuing to look for dividend opportunities although those two will frequently find their stocks at or near their yearly highs.

But given all of these considerations none of them, nether individually nor in combination, have been unique. They have been the ones faced nearly early week for about the past two years.

That makes it a little easier to approach this coming week if only there’s something to get me to be able to push the “Submit” button.

Based on the economic calendar it looks as if this may be a quiet week as the new monthly option cycle begins. Not only is there little of importance, but maybe because this is the first week of summer, there’s just very little in general. A big part of that is that not a single Federal Reserve Governor is giving a speech this week, so there is less likelihood of having someone in a position to actually impact policy saying something that’s either a slip of the tongue or gets to be mis-interpreted by anyone with a nervous finger or algorithm.

In addition, earnings season is pretty much at its end as the next season will get set to begin in about two weeks. While any given company can do as Intel did a couple of weeks ago and unexpectedly announce improved guidance that can propel markets or severely diminished guidance to shock markets, it’s not too likely that will happen.

Unless there are some real unforeseen surprises the only thing that may upset the market will be continued unraveling in Iraq and a significant rise in oil prices.

While growing US energy production makes us less hostage to oil, the reality is that our prices are still part of a worldwide market and if supply dries up in a world that’s increasingly thirsty for crude oil it will drive up our prices, as well, and slow things down on our end. While it would take a while for that to really show up on our economy the fears would begin immediately and could easily dampen the enthusiasm that Janet Yellen rekindled last week when she made it pretty clear that stocks were the way to go for now.

Not in so many words, but if you live in a world where the choice is between stocks and bonds, she gave little reason to believe that interest rates would be heading higher in 2014. Considering that much of the stock market weakness in 2014 has been related to the 10 year rate approaching 3%, you can draw a conclusion that if rates stay low then the market has reason to keep moving up even as Federal Reserve tapering continues.

This week I’m holding more cash than in about 3 months.

The combating forces this week are much like they seem to be most every week.

With the market at more new highs and with so many stocks near their personal highs just how much do you believe that the pattern keeps continuing?

Any effort in second guessing the forward movement of the market has proven wrong and I’ve definitely been on that side of things. Despite being pessimistic about the ability of the market to continue that pattern that hasn’t meant hibernating and completely abdicating the need to participate.

With money, but not to burn, in hand, I don’t envision this week being any different in terms of my willingness to let some of it go and try to generate some revenue.

The past few weeks have been relatively slow ones in opening new positions, but I expect this one will be somewhat more active, as I’m willing to take cash down to about 25%. As a defensive move I wouldn’t be completely adverse to seeking July contracts instead of weekly ones, but with volatility still so low and the short term prospects seeming positive, it’s hard to justify tying up assets.

In hindsight I may believe differently, but for the moment it makes more sense to live for today.

With that said, but already having a number of positions set to expire this week, there may at least be some reason to look for a little diversification, perhaps toward next week’s shortened trading contracts.

In addition to that bit of defensiveness I wouldn’t mind continuing to look for dividend opportunities although those two will frequently find their stocks at or near their yearly highs.

But given all of these considerations none of them, nether individually nor in combination, have been unique. They have been the ones faced nearly early week for about the past two years.

MONDAY: Seems like new week will get off to a quiet start as we have a relative break between now and the start of another earnings season in about 2 weeks

TUESDAY: Little reason to expect much activity today, but it couldn’t possibl;y be any less than yesterday. Nothing appearing on the horizon to shake things up as the morning is taking form

WEDNESDAY: More GDP concerns and more questions about how the economy could possibly have been growing with a -2.9% GDP for Q1. Assuming that the market reflected fantsasy numbers will reality be an unwelcome next event?

THURSDAY: Yesterday was a day marked by government intervention, withness SBGI, IRM and the oil refiners. That’s not an enduring theme so it’s anyone’s guess what may set the tone for today and the rest of the week.

FRIDAY: Looking like a negative ending to a mediocre and rudderless week